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China’s Economic Outlook Darkens as Fitch Downgrades Its Credit Rating

Daniel Kim Views  

China Evergrande
AP and Yonhap

Fitch, an international credit rating agency, has downgraded China’s national credit rating outlook. The agency cited the country’s struggle to extricate itself from a real estate-driven economic crisis.

According to Bloomberg News, on the 10th, Fitch downgraded China’s national credit rating outlook from stable to negative.

Fitch explained the reason for the downgrade, stating that uncertainties about the economic outlook are growing as China tries to break away from real estate-dependent growth. In particular, Fitch predicted that China’s fiscal policy would be crucial in supporting growth over the next few years, contributing to continuously increasing debt.

Fitch also predicted that China’s fiscal deficit, which was 5.8% of the Gross Domestic Product (GDP) last year, will increase to 7.1%. This is the highest level since 2020 when the fiscal deficit reached 8.6% of GDP due to stringent COVID-19 containment measures that hit the Chinese economy.

However, Fitch maintained China’s credit rating (IDR, long-term foreign currency issuer default rating) at A+. China’s economic growth rate is forecasted to fall from 5.2% last year to 4.5% this year.

The Chinese government expressed “deep regret” over Fitch’s downgrade of China’s national credit rating outlook. In a statement posted on its website immediately after Fitch’s announcement, the Chinese Ministry of Finance stated, “Fitch’s evaluation system failed to effectively reflect the positive role of China’s fiscal policy in promoting economic growth and stabilizing the macro leverage ratio in a forward-looking manner,” expressing its regret.

Daniel Kim
content@viewusglobal.com

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